(Bloomberg) — Mohamed El-Erian says gold’s rise to new record levels reflects the deliberate diversification of global financial institutions away from the U.S. dollar.

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Gold bullion climbed to its highest ever level on Wednesday, around $2,758.49, as investors focused on key macro risks in the coming weeks – from ongoing unrest in the Middle East to the US election. So far this year, gold is up 32%, outperforming the S&P 500 Index’s 23% gain.

“If we try to correlate gold price movements this year with traditional, financial and economic variables – interest rates, the dollar – the relationship has broken down,” said El-Erian, the president of Queens’ College, Cambridge, on Bloomberg Television Friday.

The “secular” move can be attributed to two fundamental factors, he added.

“One of them is the slow diversification away from the dollar in the reserves of central banks around the world,” he said. “The other is a slow diversification away from the dollar payment system.”

Although the movement has been slow, “the bad news is that momentum is increasing,” said El-Erian, who is also a Bloomberg Opinion columnist.

According to El-Erian, recent events have accelerated the trend towards gold.

Chief among them is Russia’s ability to maintain and grow trade ties even after its major banks were banned from Swift, a global financial messaging service. While recent Swift data shows the dollar’s share of international payments has remained relatively stable in recent years, just under 50% and well above other currencies, transactions using the yuan have increased in recent months.

The other event is the Middle East, El-Erian said, adding that the majority of countries have viewed the US as an “inconsistent supporter” of human rights and international law.

– With support from Jonathan Ferro and Annmarie Hordern.

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